STRE is nothing like what Michael Saylor promised on Thursday
Strategy (formerly MicroStrategy) has launched STRE, a Euro-denominated security differing from its STRC security, which targets foreign currency investors with a high-yield, quasi-pegged stock. Unlike STRC, STRE lacks a price peg and is more similar to STRF, another perpetual preferred security, but denominated in euros. STRE offers a fixed 10% annual dividend but has significant price volatility. Despite Michael Saylor's ambitious claims for multi-trillion-dollar breakthroughs with foreign currency securities, the initial public offering for STRE is targeting less than €350 million. Additionally, STRE has mid-tier capital seniority, sitting below bondholders, STRF, and STRC, marking differences in investment structure.
Strategy Launches a New Euro-Denominated Security
Strategy (formerly MicroStrategy) has announced the launch of Stream (STRE), a new Euro-denominated security. This announcement comes despite Michael Saylor's repeated promises of a new version of its existing security STRC, targeted at foreign currency investors. STRC is Strategy’s high-yield, quasi-pegged preferred stock that trades near a $100 peg and pays tax-deferred, monthly, return of capital (ROC) dividends.
Key Features of STRC and Comparison to STRE
STRC currently offers an annualized dividend of 10.5%, which fluctuates to help maintain its trading price near $100. However, STRE does not share similar characteristics. Unlike the fiat-stable breakthrough Strategy has been promising, STRE is not intended to maintain any price peg. Instead, according to Saylor, STRE is most similar to STRF, though it’s denominated in euros rather than dollars.
Scaling Challenges and Initial Public Offering Details
Strategy’s initial public offering for STRE is set at less than €350 million, which falls short of Michael Saylor's multi-trillion dollar vision aimed to serve every accredited investor globally. This discrepancy between the grand ambition and the modest IPO amount underscores the challenges in scaling up such a product.
STRE and the Vision for Foreign Currency-Denominated Securities
On the third quarter earnings call, Saylor and CEO Phong Le heavily promoted their ambitions for foreign currency-denominated securities akin to STRC. Saylor envisions a goal of 1 billion buyers for STRC or its future foreign currency versions. He has also repeatedly likened STRC to a high-yield savings product, boasting a tax-equivalent yield of 16.5%. Unfortunately, STRE's fluctuating price and fixed dividend rate fail to align with this vision of rolling out price-pegged, floating-rate STRC counterparts for foreign currency investors.
Similarities Between STRE and STRF
Both STRE and STRF are perpetual preferred securities that pay a fixed 10% annual dividend. However, both also exhibit daily price fluctuations with significant volatility. Notably, unlike STRF, STRE holds mid-stack capital seniority, ranking lower than bondholders, STRF, and STRC in priority. While seniority is less critical than the dividend rate or stated value adjustments, this difference highlights US dollar investors' preferential standing over euro investors in STRE.